The New Consensus and Post-Keynesian Interest Rate Policy

Claude Gnos () and Louis-Philippe Rochon

Review of Political Economy, 2007, vol. 19, issue 3, 369-386

Abstract: This paper outlines the fundamental arguments of the New Consensus, critiques it from a Post-Keynesian perspective, and offers a Post-Keynesian alternative to the Taylor Rule. While Post-Keynesian economics provides a theory of endogenous money with exogenous interest rates, it has no clear description of a central bank reaction function. We attempt to remedy this oversight by identifying some of the difficulties attached to developing a Post-Keynesian reaction function, and suggesting an approach to the setting of interest rates that is more consistent than the Taylor Rule with Keynes's General Theory.

Date: 2007
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DOI: 10.1080/09538250701453071

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